Module 9 Learning Checks

Which statement is true with respect to fixed and variable costs? A variable cost is variable in total and increases per unit as the number of units increases. A fixed cost is variable in total and decreases per unit as the number of units increases. A fixed cost is fixed in total and decreases per unit as the number of units increases.

A fixed cost is fixed in total and decreases per unit as the number of units increases.

Why do companies allocate overhead costs based on estimated overhead numbers instead of actual numbers? Because overhead costs must be allocated beginning the very first day of the period, but the actual numbers not available until the end of the period. Because estimated numbers are more precise than are actual numbers. Because actual numbers are used for financial accounting purposes, and only estimated numbers may be used for managerial accounting purposes. Because overhead costs can only be estimated; the precise numbers can never be known.

Because overhead costs must be allocated beginning the very first day of the period, but the actual numbers not available until the end of the period.

What must be true of an indirect cost? It is a cost incurred outside the production facility or factory. It is a cost remaining constant in total regardless of sales. It is a cost that cannot be traced to a specific business unit or product. It is a cost of a benefit not received because an action was not taken.

It is a cost that cannot be traced to a specific business unit or product.

What must be true of a direct cost? It is a cost traceable to a specific business unit. It is a cost that changes in proportion with changes in liabilities. It is a cost incurred outside the production facility. It is a cost in the future that can be changed by a decision today.

It is a cost traceable to a specific business unit.

What is the relevant range? The range of volume over which the variable cost per unit is expected to remain the same The range of volume over which the selling price per unit is expected to increase The range of volume over which the variable cost per unit is expected to increase The range of volume over which the fixed cost per unit is expected to remain the same

The range of volume over which the variable cost per unit is expected to remain the same

If overhead is under applied during a period, which statement below is true? The stated total cost of goods sold will not be affected. The total cost of goods sold will be overstated. The stated total cost of goods sold will be affected by an indeterminable amount. The total cost of goods sold will be understated.

The total cost of goods sold will be understated.

Which statement below is true with regard to fixed costs? Total fixed costs do not change in total within a relevant range of activity. Total fixed costs never change, even when business activity exceeds the relevant range. Total fixed costs always change in total within a relevant range of activity. Total fixed costs change in a manner similar to variable costs in every situation.

Total fixed costs do not change in total within a relevant range of activity.

Which statement below is true with regard to variable costs? Total variable costs change in a manner similar to fixed costs in every situation. Total variable costs never change, regardless of the volume of activity. Total variable costs change in relationship to the volume of activity. Total variable costs do not change in total in relationship to the volume of activity.

Total variable costs change in relationship to the volume of activity.